MODULE 01:: SUPPLY CHAIN

MANAGEMENT
PROPERTY OF Prof.
Mariano E. Parangue Jr.
SUPPLY CHAIN MANAGEMENT:
WHY IS IT IMPORTANT FOR YOU
MODULE 1: SUPPLY CHAIN DEFINITION &
IMPORTANCE

• Supply Chain & Management Definition

• Supply Chain Management: Basic, Evolution, Ultimate
• Integrated Supply Chain Management
• Strategies involved in SCM
• Business Models for better integration
• Activities involved in SCM
• Importance of Planning
 What is Supply Chain?

•The processes from the initial raw materials to the ultimate

consumption of the finished product linking across
supplier-companies.

•The functions inside and outside a company that enable the

value chain to make products and provide services to the
customer
Supply Chain Management
“The systematic ,strategic, co-ordination of the traditional business
functions within a particular company and across companies between
the supply chain, for the purposes of improving the long term
performance of the individual companies and the supply chain as a
whole.”
The Evolution of Supply Chain

BASIC SUPPLY CHAIN

EXTENDED SUPPLY CHAIN
ULTIMATE SUPPLY CHAIN
 Integrated Supply Chain Management

Sources Suppliers Procuremen Demand & Sales & Customers Consume

t Supply Marketing rs
of supply
Planning

FLOW OF INFORMATION

FLOW OF GOODS

Manufacturing Distribution
BUYERS HAVE MORE DEMANDING REQUIREMENTS

Reliability

Industry Lowest total

Specialization cost

What buyers Consistent

Optimization
wants Global
Capability

Tight Global End to

Synchronization End
Deeper integration
Integration
with Partners
Strategy of Supply Chain Process
1. Outsourcing of entities that can contribute in
achieving goal in a cost efficient manner.
- Outsource of TPLs (Distributors, Franchising)
• Optimize warehousing & distribution facilities
• Encourage business with suppliers, distributors and
customers
• Apply efficient Logistics Strategy
• Invest in the improvement of Information technology
and channels.
• Train and improve people.
2. Customer Service Strategies

• Develop Customer Service as a single point of contact for

all non-commercial issues

• Build in-depth knowledge of customers and customize

services that will best serve his business (maintain a
customer perspective)

• Position Customer Service as an integral part in doing

business with the customer

• Be the champion of customer service best practices

• Recognize effectiveness of action through improved KPIs

• Information Technology enabled.

3. Demand & Supply Planning Strategies

• Be a conduit of accurate, relevant and timely information

• Be the champion of planning processes across all areas

• Elevate and reposition KPIs as central focus to drive

continuous improvement
• Develop and maintain a pool of highly specialized planners
4. Distribution Resources Management
Strategies

• Apply the appropriate distribution network that will result to desired

customer service and at optimum cost
• define, identify and segment customers
• Avoid the pitfall of a ‘one-size fits all’ solution

• Leverage the capabilities of logistics providers who will act as effective

extension of SCM, focusing on solutions that will drive down costs,
enhance customer service and help identify opportunities for future
development.
• Make use of KPIs to drive cost efficiencies and effectiveness.
• Be early adaptors of supply chain standards, trends & best practices.
5. Organization & Training Strategies

• Hire and develop people who can work in different areas of

supply chain, be it in the Philippines or outside (flexibility)
• Provide formal and hands-on training programs
• Optimize use of cross functional team in resolving issues
• Advocate a performance driven culture in SCM (no excuses
attitude)
• reward and recognize base on performance
• get everyone performing above expectations
• Create a shared mindset in the organization
• employees know what the organization is trying to accomplish
(clear mission and goals)
• why it is headed in one direction and not the other (alignment)
• what each individual contributes to the over-all goal (commitment)
 Improved information helps enterprises
Supply Chain Strategy to plan ahead and be more competitive

FINANCIAL •Planning and Acquisition

AND
PHYSICAL •Cash Flow impact
ASPECTS

INFORMATION HUMAN
RESOURCES •Securing and developing
SCM
•Supplier development
•Demand forecast programs
•Customer delivery
requirements
NETWORKS & •Strategic Chain Alliances
•Inputs of supply markets RELATIONSHIPS

•Supply chain services

Business Model for greater scope and deeper
integration
SERVICE OFFERS OUTSOURCE MODELS ATTRIBUTES RELATIONSHIP PRICING

Supply Chain •Broad Supply Chain Expertise

Integrator or Collaborative Shared
•Knowledge and information hub
Lead Logistics partnership risk and
SYNCHRONIZED •End to end network optimization
SUPPLY CHAIN
Mgnt or Global reward
Trade Adv •Advance integrated technology

•Total Transport planning Fixed and

Lead •Single point of contact
Contractual variable with
Logistics some risk
•Limited technology
LEAD LOGISTICS Provider integration with client
sharing

3rd party •Integration limited to Contractual

VALUE ADDED Fixed and
SERVICES Logistics transport and minimal
variable
provider warehousing

Transport, •Focused cost Contractual

FOUNDATION SERVICES Transactional
warehousing reduction
Customs and or spot
•Niche services
broker
 Supply Chain Ambition

• Customer Service
• Highly efficient, low-cost operations
• Accuracy and speed of information flow across the supply
chain
• Innovation/Renovation
• Number 1 collaborator

The center of SCM competency and best practices in the Zone and the
preferred source of SCM practitioners.
ELEMENTS OF SUPPLY CHAIN MANAGEMENT

• Planning
• Sourcing
• Distribution
PLANNING

Planning process is a collaborative forum where the cross functional teams

from sales, production, finance and materials interact with the higher
management to track and discuss the changes in the market conditions and its
corresponding affect on the sales plan and the Strategic Business Plan every
month. The process is iterative. If the production cannot meet the sales targets
due to resource constraints, the sales plan is changed and cascaded again. The
output of the S&OP process is the approved Sales plan, production plan and
inventory/backlog plan.
During Strategic Planning, firms
will be trying to achieve six
aims:

• Maximization of sales
opportunities
• Achieving High level of product
availability
• Achieving High level of customer
service
• Minimizing costs
• Gaining timely, accurate market
intelligence
• Ensuring smooth integration of
both commercial and physical
aspects of the distribution chain.
FORECASTING
• Determining Inventory Levels by estimating future demands.
• Forecasting estimating based on future demands based on:
• Historical figures to predict future sales
• Creation and collection of information
• Management of Information
• Making of well Informed decisions about what you need to produce
• Forecasting helps to improve customer service, reduce inventory, increase
productivity, improve deliveries from suppliers.
USES OF FORECASTING
Forecasting is meaningful only if it
helps to:

•Improve customer service

•Reduce Inventory
•Increase productivity
•Improve deliveries from
suppliers
SAMPLE FORECASTING FORMULA
Item Actual Forecast Forecast error % Forecast error

Product A 245 230 15 6.5%

Product F 110 120 10 8.3%

Total 355 350 5 1.4%

The above entries should be able to tell you what

needs to be improve when you indicate your own
information.
FORECASTING STRATEGY
• 1. Establish what do you need and why?
• 2. Select the right structure
• 3. Validate using historical figures
• 4. Document the validation made
• 5. Management is the KEY
Distribution Channel
Distribution channels, seen from marketing standpoint can be called marketing
channel, trade channel, or transaction channel. From a logistical point of view it
can be referred to as “Logistics Channel”

“The route taken by a commodity between the point of production and the point of sale and /or
consumption”